Dobbs Decision: Implications For Employer-Sponsored Group Health Plans – Employee Benefits & Compensation

The recent decision of the Supreme Court to overturn Roe v.
Wade has created additional complexities for employers. As
publicized, some employers are reacting to the Supreme Court
decision by announcing that they will reimburse travel and lodging
expenses incurred by employees and their dependents who must travel
to another state to obtain an abortion. Many of these employers are
providing for this reimbursement through the employer’s group
health plan, which raises several legal considerations. This
bulletin provides high-level employer group health plan items to
consider.

In general, it appears most employers are providing
reimbursement of travel and lodging expenses through the group
health plan to shield against potential state civil and/or criminal
penalties. In particular, employers are looking to the preemption
rules under the Employee Retirement Income Security Act of 1974
(ERISA). ERISA is a federal law that regulates most employee
benefit plans. A goal of ERISA is to provide national rules, so
that plan sponsors do not have to comply with various state laws
that sometimes conflict. The recent Supreme Court decision is a
perfect example of this conflict in that abortions are only legal
in some states.

Under the ERISA preemption rules, ERISA will generally
“supersede any and all state laws insofar as they may now or
hereafter relate to any employee benefit plan”. Many employers
are relying on the ERISA preemption rules to cover abortions under
the employer group health plan. Taking the ERISA preemption rules a
step further, many employers are looking to add the reimbursement
of travel and lodging expenses for health plan participants and
their dependents that will need to travel to a different state to
obtain an abortion.

Whether or not the ERISA preemption arguments will withstand a
legal battle over a state anti-abortion law is yet to be seen, as
the law is still developing. Moreover, it is essential to note
several exceptions to the ERISA preemption rules that could become
even more relevant after the Supreme Court’s decision. One such
exception is that ERISA does not supersede “any generally
applicable criminal law of a state.” This exception is
becoming more critical as states adopt aiding and abetting laws
that subject those who help facilitate abortions to civil and/or
criminal penalties. The term “generally applicable criminal
law” has been interpreted to mean laws such as larceny, but
state laws that specifically only regulate employee benefit plans
would not be a generally applicable criminal law. As the state laws
are rapidly changing in the wake of the Supreme Court’s
decision, employers will need to pay close attention to state
anti-abortion laws to make a reasonable assessment as to whether
the ERISA preemption rules may apply.

In addition, when looking to add travel and lodging
reimbursement to a plan and potentially obtain ERISA preemption
protections, an employer must first consider the type of plan
sponsored. In this regard, there are two types of plans. The first
type of plan is a fully-insured plan, whereby the employer pays
insurance premiums to an insurance company that then pays the
medical claims. The second type of plan is a self-insured plan
whereby the employer pays claims out of its general assets, and the
employer engages a claims administrator to process and pay medical
claims.

In the case of a fully-insured plan, the insurance policy will
need to comply with the state law where the policy is issued. In
addition, even if the state law allows for abortions and travel and
lodging reimbursement, the insurance company may not agree to add
abortion-related travel and lodging expense reimbursements to the
policy. As such, employers will need to work with their insurance
broker and insurance company to determine the policy design and
whether to add benefits.

Self-insured plans have a lot more leeway as far as plan design.
In this regard, the employer will need to work with the claims
administrator to see if the claims administrator will agree to add
abortion-related travel and lodging expense reimbursement as a plan
benefit. It is not a given that all claims administrators will take
on this task. In cases where a claims administrator will not take
on this task, we have heard of some employers wanting to take on
this task themselves either by processing abortion-related travel
and expense reimbursements or creating a separate reimbursement
policy outside of the health plan. Employers should carefully
consider the implications of either approach. For example,
processing reimbursements involves access to employee and dependent
information that could add privacy considerations under the Health
Insurance Portability and Accountability Act of 1996 (HIPAA) or
state privacy laws. Also, reimbursing travel and lodging expenses
outside of the health plan would generally remove the ERISA
preemption argument from an employer’s protection against state
aiding and abetting laws.

In addition, other items to consider are the taxation of travel
and lodging reimbursements and how to treat travel and lodging
expense reimbursements under high-deductible health plans. First,
current IRS rules limit tax-free lodging expenses to no more than
$50/daily and transportation expenses to no more than $50/daily for
each person traveling. Amounts reimbursed above these limits would
be taxable benefits. Second, many employers have adopted high
deductible health plans that require a participant to incur
expenses up to a certain deductible before the plan pays medical
expenses. Based on current IRS rules, the travel and lodging
expenses would need to be included in the deductible before the
plan begins to pay benefits.

As evident, the implications of the Supreme Court’s decision
has added complexity to the already complex health plan compliance
rules.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.